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Helping Water Utilities Survive the Down Economy with ENERGY STAR® Tools and Resources

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Water utilities face a variety of financial challenges caused by changes in service demands, government and environmental regulations, ever increasing operating and construction costs, and even the weather. A backlog of deferred maintenance and ongoing pressure to keep water rates down enforce the need to seek alternative financing solutions.

While organizations cannot control the economy, controlling their energy expenditures is a good defensive position in a recessionary environment. Most efficiency projects require capital, and many capital budgets are frozen due to the current economic climate. Financing these energy efficiency projects using third parties (e.g., state energy offices, community banks and leasing companies) are viable alternatives to delaying the projects. In spite of tightening underwriting criteria and higher borrowing rates not reflecting the low cost of borrowing made available by ARRA funding, installing energy efficiency projects is a good business decision. Part of the improved cash flow can pay for financing the project, while creating jobs and reducing greenhouse gases.

Traditional financial metrics like Return on Investment and Internal Rate of Return undervalue one of the biggest advantages of efficiency projects: improved cash flow. The U.S. Environmental Protection Agency's (EPA) ENERGY STAR program has developed numerous public domain tools that promote energy efficiency. ENERGY STAR's Cash Flow Opportunity Calculator monetizes the cost of delaying installations; calculates the amount of new equipment and services that can be paid for with operating budget savings; and compares different interest rate options. It helps non-financial managers make informed decisions, yet is sophisticated enough to satisfy financial decision makers. The value of energy efficiency improvements increases in line with energy cost increases, making them good short, medium and long term strategies.
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Keywords: energy efficiency; energy performance contracting; financing; tax-exempt leasepurchase agreements

Document Type: Research Article

Publication date: 2009-01-01

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